In view of the diversified business structure, strong management perception and future growth potential in the entertainment industry, BRICS PCG has recommended a buy on UTV Software with a target price of Rs 250. According to a report released by the research house, "UTV recorded revenue of Rs 83.6 crore in Q4FY06 as compared to Rs 50.7 crore in the same period last year, registering a growth of 65 per cent yoy. This was led by revenues from films at Rs 62.6 crore. The company registered EBIT margins of 2 per cent in television, 16 per cent in films and 20 per cent in the allied content services segment. Operating profit stood at Rs 8.5 crore resulting in an operating margin of 10 per cent during Q4FY06. Margins were under pressure mainly because of higher investments in animation and the airtime sales business. Net profit for the quarter was recorded at Rs 6.6 crore with a net profit margin of 8 per cent. "During FY06, UTV registered revenues of Rs 210 crore compared to Rs 180 crore, recording a growth of 18 per cent yoy. The films segment earned Rs 130 crore and included production and distribution revenues of nine films, out of which two were unsuccessful. Films like Rang De Basanti, Bluffmaster and Taxi No 9211 were major successes for the company. The company posted an operating profit of Rs 11.6 crore, which was a de-growth of 53 per cent yoy during FY06."Net profit for the year thus declined 43 per cent yoy to Rs 9.3 crore, translating into a EPS of Rs 5 with a equity base of Rs 19.5 crore. "The introduction of new programmes in content production and matured slots in airtime sales are expected to translate into better margins, going forward. All new additions on various channels are expected to translate to more than 15 hours of content on an average for FY07.""The company is investing a total of Rs 8.5 crore in animation facilities, which are expected to be fully operational during the first quarter of FY07."
